The High-Probability Trade Every Options Trader Should Know About

In my latest webinar “Create Your Own Odds: the High-Probability Trade for Consistent and Easy Income” I discuss the most overlooked aspect in all of investing/trading……probabilities.

Probabilities allow the self-directed investor the ability to choose trades with a proper return on capital while creating a risk profile that suits each individuals needs. Basically, when using options appropriately you are able to choose your own probability of success.

Trading stocks only has a probability of success of 50%. I harp on this statistic all the time, but for some reason self-directed investors can’t comprehend the magnitude of that number.

Below is the chance of having three profitable trades in a row given the probability of success.

The 33% represents the typical out-of-the-money trade that a retail options trader makes. As you can see the probability of success is already only 33% to start and to try to successfully make that type of trade 3 times in a row…well you are better off going to Vegas.

As for the 50% trade, that is your typical stock or futures trade, essentially a coin flip. As you can see to obtain three successful trades in a row you only have a 12.5% chance. Again, not good. So the question is why do so many investors/traders choose to participate in something that is statistically a loser from the onset. Yet, most investors choose this route. They choose to enter into something that is inherently a loser. It makes no sense.

Only when you get to a probability of success 85% and greater do you start to see the true advantages of using a probability of success for each and every trade you place.

Probability of Success

  • Probability of Success = 90%   3 in a row   = 72.9%
  • Probability of Success = 85%   3 in a row   = 61.4%
  • Probability of Success = 68%   3 in a row   = 31.4%
  • Probability of Success = 50%   3 in a row   = 12.5%
  • Probability of Success = 33%   3 in a row   = 3.6%

But again, most investors/traders ignore the advantage of investing with probabilities. And this is why most traders fail.

Kindest,

Andy Crowder

Editor and Chief Options Strategist

Options Advantage and The Strike Price

Published by Wyatt Investment Research at